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You May Have Built Your Business, But You Had Help

For the past couple of weeks the Romney camp has been bombarded with new attacks about Bain Capital, along with an unrelenting demand for more than just one year of his tax returns (this is coming from both the right as well as the left). Needless to say, not a great few weeks for Team Romney. However, it appears Romney thinks he may have found some political ammunition with which to fight back.

Recent remarks by President Obama, at a rally in Virginia, left conservatives salivating at the political fodder delivered by the President. The right-wing ‘blogosphere’ has had a field day with the President’s line, “If you’ve got a business, you didn’t build that.” Conservatives are using these remarks to reinforce their line of attack that Obama doesn’t understand how the economy works, and they’ve even gone so far as to call him un-American. (See John Sununu)

Now, before I go into my usual Republicans are wrong, and have no idea what they are talking about spiel, I will say the President could have been a little more eloquent with his choice of words. Small business owners do have to work incredibly hard, and they do have to take risks, which are not inherent to other careers.

But… that does not mean what the President said was wrong. A little context needs to be added. The backdrop of this past week and half or so has been a discussion about taxes, specifically; ending the Bush tax cuts for the top income earners – or, in many cases, your business owners. The President has been asking for their tax breaks to end in part to address growing deficits, in part to hinder the burgeoning divide between the rich and everyone else, and in part to bring back tax rates to more historical norms when job growth was much stronger. But, it is mostly to ensure the top earners in America are paying their fair share.

And that’s the issue here. It’s not that the President is un-American, quite the contrary. The majority of the twentieth century marked an era where there was an understanding in America, a sort of social contract, that every person should do their part in making America great. This meant higher earners paid higher taxes. No one said this was socialism or the destruction of America, but rather ensuring the American dream stayed alive. It was for this reason we saw top marginal tax rates during this era close to 80 percent, a number unfathomable in politics today. There was a belief, which is true, that if you are successful it was made possible by the help of a lot of other people. So it only made sense for them to pay a little more in taxes.

That attitude changed though. We went from a society where the very wealthy paid their fair share, to a society of Gordon Geckos, a society where greed was believed to be good. We became a society where the wealthy no longer used their wealth to create a better country, but used it to grow their own bank accounts. Their influence went to creating a tax code filled with loopholes and deductions that disproportionately benefited themselves. It went to deregulating businesses at the expense of people and the environment. It went to creating a financial sector where risk was taken off of the investors and bankers, and put onto the average person. We became a country centered on making the wealthiest members of society even richer.

And this brings us to today; where the mere mention of business owners and job creators paying a little more in taxes is wholeheartedly rebuked and deemed as socialism, and to imply that successful people received help from the government is an attack on America itself. When in reality they did have help, and they should pay more. Job creators, like most of us, went to a public school or hired someone who went to a public school, which are paid for by taxpayers. They drove on roads and bridges built by public funds. They most likely advanced their business through the use of the Internet, which was created with the help of government research. (By the way, these are all points the President mentioned in his speech. Shocking – Romney took the line out of context.)

The point is that business owners are successful in part because of people and the government. It is for that reason they should pay higher taxes. Sure, job creators created their businesses, but they didn’t do it alone. In fact, they had a lot of help, whether they want to believe that or not. So it’s not socialism or class warfare to ask the rich to pay more – it’s American.

8 thoughts on “You May Have Built Your Business, But You Had Help”

Where do you think the money comes from to “help” these small business owners build their business? Maybe through the taxes they paid due to running a successful business? So, because they were successful at using resources they helped to fund; they should be forced to pay higher taxes?

So you’re argument is that since business owners already paid taxes for the resources they used to become successful they therefore should not have to pay more once they are successful? This assumes that the business owner paid enough in taxes to pay for all the government resources they used – that just does not not add up. No one person pays enough taxes to provide for all the resources the government provides.

The small business tax increase applies to less than 2% of businesses, and will amount to a few hundred dollars per employee. Just because the republicans are making a big deal about it, doesn’t make it so. Also, companies have the most cash in their treasures than at any time in history, and they still refuse to create jobs.

A bit of actual truth from the right would go a long way towards ending the partisanship .

First of all, saying the small business tax only applies to 2% of businesses does not carry much substance. Most small businesses (around 75% of them) are organized as pass-through entities such as: S Corporations, Partnerships and Sole Propiertorships. While they are reporting large incomes on their individual returns and are classified as “the wealthy”, that income is actually being reinvested into the business and not into their bank accounts. Over 70% of S Corp income comes from owners who end up in the top two marginal rates. These are the businesses that create the majority of the jobs, not the “mom and pop” shops who won’t be affected by this tax plan. Coupled with the 3.8% surtax on investment income that comes from Obamacare, businesses in this bracket will see their after-tax income decrease by roughly 8%. I can’t imagine a business that loses 8% of their income is going to be very willing to add new jobs.

Second, saying that corporations “have the most cash in their treasures than at any time in history, and they still refuse to create jobs.” shows a lack of understanding the mission of a corporation. A corporation is set up to maximize shareholder wealth by turning profits, not to serve the public and hand out jobs. Executives of a corporation need to answer to their investors and justify how their investment is being used to maximize wealth. If the shareholders are not satisfied with how their funds are being used, they no longer invest in that corporation. Perhaps these corporations are holding large cash reserves because the economy is so weak and investment at this point is incredibly too risky. When a corporation is able to thrive in the right environment, it wll be able to expand and create jobs as the needs arise.

Alex, to your point, I absolutely do not believe that business owners should be forced to pay more taxes because they were succesful with the resources (available to everyone) they helped fund. Otherwise, where is the motivation to succeed? What upsets me is that you want succesful small business owners to pay for government entitlements and resources that benefit the nearly 50% of Americans that do not pay an income tax. How much more do you possibly want these succesful businesses to pay in tax?

Success needs to be rewarded, not penalized, so that companies have reason to expand and thus create more jobs.

To your other point it comes down to what type of society you want. Do you want one where we cater to the rich in the hopes that prosperity trickles down? We’ve tried that – it didn’t work. Or do you want a society where the wealthiest pay a little more in order to give the disadvantaged a fighting chance to succeed.

I know you get angry that 50 percent of people pay no income tax, but part of that is due to the growing population living in poverty where they legally do not have to pay any income tax. This is what happens when the system is set up for the rich to get richer, it only leads to greater income inequality and an unfair society. What I think is even more ridiculous is that there are 21,000 Americans who make over 200,000 dollars a year and pay zero in taxes. (http://www.tnr.com/blog/plank/103897/why-rich-people-dont-pay-taxes)

By the way one of the ways the rich avoid paying taxes is by setting up S corporations to get out of paying payroll taxes.

Also, just out of curiosity do you have a source for this statement “Over 70% of S Corp income comes from owners who end up in the top two marginal rates”?